AND THE WINNER (SO FAR) IS VETERAN-OWNED SMALL BUSINESS!

We promised to keep you updated on the Federal Circuit’s disposition of a case addressing the collide between the Veterans Benefits, Health Care and Information Technology Act of 2006 (VBA) and the Javits-Wagner-O’Day Act (JWOD) in procurements at the Department of Veterans Affairs (VA). Each statute provides valuable award preferences to different disadvantaged small businesses, but which statute has priority?

In Kingdomware Technologies., Inc. v. United States, 136 S. Ct. 1969 (2016), the Supreme Court held that except when the VA used its statutorily prescribed noncompetitive and sole-source contracting procedures, it was obligated under section 8127(d) of the VBA to use the “Rule of Two” analysis before awarding a contract to another supplier. The “Rule of Two” requires the award of VA contracts based upon a competition restricted to small businesses owned and controlled by veterans if the contracting officer has a reasonable expectation that 2 or more such businesses will submit offers and an award can be made at a fair and reasonable price that offers best value to the government. Kingdomware did not address the interaction between the VBA and the JWOD. This was decided in the case below.

In PDS Consultants, Inc. v. United States, 132 Fed. Cl. 117 (2017), plaintiff, a service-disabled-veteran-owned small business, filed a protest with the Court of Federal Claims. The plaintiff, who was engaged in the sale of vision-related products, sought declaratory and injunctive relief requiring the VA to perform the “Rule of Two” analysis under the VBA– for the benefit of veteran-owned small businesses providing these products — prior to awarding any such contracts under the JWOD/AbilityOne List.

The court sided with the plaintiff. In brief, the court held that the VA had a legal obligation under the VBA to perform the “Rule of Two” analysis for the relevant procurement of eyewear where such an analysis had not been performed. It enjoined the VA from entering into future contracts with JWOD contractors without first performing this analysis. The defendants appealed to the Federal Circuit.

The Federal Circuit affirmed the lower court. PDS Consultants, Inc. v. United States, 2018 WL 5019735 (10/17/2018). In brief, the Court held that the requirements of the more specific – and later enacted –VBA took precedence over the more general and earlier-enacted JWOD statute. The Court concluded that even if a product/service is on the List and ordinarily would result in a JWOD award, the VBA requires that priority is given to veteran-owned small business. As applied to the facts of this case, this required the VA to undertake the “Rule of Two” analysis before procuring the eyewear from any other source, including the JWOD/AbilityOne List.

Is it “game over”? Perhaps not. The defendants may seek further court review. And of course, Congress may weigh in again. But for now, chalk this one up for veteran-owned small business!

Jack Delman served as a judge on the Armed Services Board of Contract Appeals for 29 years and has extensive experience in the adjudication and mediation of large and complex contract disputes, including equitable adjustments, terminations and cost and pricing issues.